Food prices still worryingly high, admits Chancellor Jeremy Hunt

UK food prices continued to rise at their fastest pace in nearly 45 years in April as inflation fell more slowly than expected.

Grocery price growth slowed slightly in the year to April, but was close to a record high of 19.1%.

That comes as inflation across the UK fell sharply, reaching single digits for the first time since August last year.

However, it did not fall as much as expected and the prime minister said food prices remained at “an alarmingly high level”.

Prices rose 8.7% in the year to April, according to the Office for National Statistics (ONS).

That was down from 10.1% in March, but above the 8.2% figure widely expected by analysts.

The decline is due to the fact that energy price gains are slowing after the extreme surge seen a year ago shortly after oil and gas giant Russia invaded Ukraine and was sanctioned.

However, that doesn’t mean prices are going down, it’s just that prices are rising at a slower rate.

Prime Minister Jeremy Hunt told the BBC that the sharp decline in key inflation rates was “welcome news” but that “underneath these numbers there is an indication that the battle is far from over. ” he admitted.

“We still have a long way to go.”

The ONS said some vegetables, such as potatoes, were more expensive than they were a year ago.

But he said food price inflation was still near its recent peak, but prices for staple foods such as bread, cereal, fish, milk and eggs were falling.

“If you look at the prices companies are facing and what they’re paying for domestic food, they’ve gone from over 15% annualized last month to less than 10% this month,” said ONS chief economist Grant Fitzner. ‘ said.

The price companies are paying for imported food has also fallen “significantly”.

However, “Of course they’re not reflected on supermarket shelves yet,” he said.

Retailers argue that lower wholesale prices take longer to hit supermarket shelves because they typically sign long-term contracts with food producers.

So-called core inflation, which excludes food and energy prices, rose to a 31-year high of 6.8% in April, despite lower headline rates.

Mr Hunt said the government would “relentlessly stick to its anti-inflation plan”, which he said was causing industrial unrest and “tremendous pressure” on household budgets.

But Labour’s shadow prime minister, Rachel Reeves, said families would worry that prices for food and other essentials remained high.

“They will ask why the Conservative government is still not addressing this cost-of-living crisis adequately, and why it has not introduced an appropriate windfall tax on the enormous profits of the oil and gas giants.”

Inflation in April is still four times the Bank of England’s target of 2%.

In order to stop the rapid rise in prices, the interest rate has been raised 12 times since December 2021. While this should be a boon for savers, costs are rising for borrowers, including millions of mortgage holders.

Samuel Toombs of Pantheon Macroeconomics said at the Bank of England meeting on June 22, further rate hikes “are now firmly on the table” and could push borrowing costs up to 4.75% from 4.5%. Expect.

Other than falling below double digits, the latest inflation rate didn’t have much to celebrate. It’s hard to see how that reflects a significant shift in household finances.

Headline interest rates are still close to 9%, but should continue to fall.

Most worrisome is the surge in core inflation, a measure of price pressure that removes the most volatile factors such as food and energy. At 6.8%, it is now the highest level in 31 years and is the indicator most closely watched by central banks such as the Bank of England.

The market is now calculating that further rate hikes are certain. A sharp rise in core inflation could lead to further gains in August. In a little-publicized statement yesterday, the International Monetary Fund warned of a “premature celebration” of overthrowing inflation.

When an economy hits double-digit inflation, it tends to take years, not weeks, to get out of that economic system.

Households aren’t the only ones affected by sharp price increases. Welsh farmer Lil Jones said the past 12 months had been “challenging” with rising prices for feed, fertilizer, diesel and electricity.

Jones runs Darwid Farms in Cowen, where he raises 32,000 chickens and also raises cattle.

He told the BBC that the war between Russia and Ukraine is adding to the pressure as Russia buys fodder from the global market.

But Mr Jones said there is “a glimmer of hope in the coming months” as fuel and diesel prices have started to fall.